The experiment looks like some ingenious test of mental telepathy. Seated inside a small isolation booth with wires trailing from the helmet on her head, the subject seems deep in concentration. She does not speak or move. Suddenly, a little white dot hovering in the center of the screen comes to life. It sweeps to the top of the screen, then it reverses itself and comes back down. After a pause, it veers to the right, stops, moves to the left, momentarily speeds up and finally halts - almost as if it were under the control of some external intelligence. In fact, it is. The unusual experiment, conducted at the Stanford Research Institute in Menlo Park, Calif., is a graphic display of one of the newest and most dazzling breakthroughs in cybernetics. It shows that a computer can, in a very real sense, read human minds. Although the dot's gyrations were directed by a computer, the machine was only carrying out the orders of the test subject. She, in turn, did nothing more than think about what the dot's movements should be. Brainchild of S.R.I. Researcher Lawrence Pinneo, a ... neurophysiologist and electronics engineer, the computer mind-reading technique is far more than a laboratory stunt. The key to his scheme: the electroencephalograph, a device used by medical researchers to pick up electrical currents from various parts of the brain. If he could learn to identify brain waves generated by specific thoughts or commands ... he might be able to teach the same skill to a computer. Pinneo does not worry that mind-reading computers might be abused by Big Brotherly governments or overly zealous police trying to ferret out the innermost thoughts of citizens.